Do you need to save money for an upcoming project? Can you no longer contribute to your RRSP because you’ve reached your limit? Are you planning to purchase a boat or renovate your home in the next few months? The Tax-Free Savings Account is just what you need! Thanks to this new savings vehicle, you’ll have no income tax to pay on your investment earnings.
WHAT’S A TFSA?
It’s a registered savings account offered by the Canada Revenue Agency. The TFSA allows you to accumulate tax-sheltered savings. That is, income earned from your investments (interest, dividends and capital gains) aren’t taxable and never will be, even if you withdraw amounts accumulated in your TFSA. And that’s not all: anytime you make a withdrawal from your TFSA, you’ll recover your contribution room in subsequent years. All Canadian residents aged 18 years and
older can invest up to $5,500 per year in a TFSA. To find out the maximum amount you can invest, simply refer to the Notice of Assessment sent every year by the Canada Revenue Agency following the filing of your income tax return.
LAURENTIAN BANK’S TFSA
Laurentian Bank is proud to offer the most comprehensive TFSA available on the market today.
The Laurentian Bank’s Tactical TFSA could include the following types of investments:
- Cash account
- GIC and Term Deposit
- Mutual funds
The Tactical TFSA is the ideal way to grow your savings while earning tax-sheltered investment income. For added convenience, you will also be able to access your Tactical TFSA online, anytime.
Laurentian Bank’s Tactical TFSA can be paired with the Investment Plan (PAC) for an easier and more effective way to save!
TFSA OR RRSP?
If you wish to ensure a comfortable retirement, it’s important that you contribute to an RRSP. Any contributions made will decrease your taxable income, and any income earned from your investments won’t be taxable for as long as the funds remain in your RRSP. The TFSA doesn’t serve as a replacement for an RRSP, but as a complement. To help you make the right choice, the following table illustrates the differences between a TFSA and an RRSP.
|Eligibility||All Canadian residents aged at least 18 years, regardless of income.||All Canadian citizens aged 71 years or younger with earned income.|
|Eligible investments||GIC, term deposit, ActionGIC, mutual funds, etc.||GIC, term deposit, ActionGIC, mutual funds, etc.|
|Tax advantages||Amounts invested in a TFSA are not deductible. Investment earnings in a TFSA are sheltered from tax.||Amounts invested in an RRSP can be deducted, up to the annual allowable limit. Investment earnings in an RRSP are sheltered from tax.|
|Access to funds||Funds can be withdrawn from a TFSA, according to the characteristics of the investments held.
The amount withdrawn is not taxable. There are no restrictions on the withdrawals - you can take out any amount for any reason.
|Funds can be withdrawn from an RRSP, according to the characteristics of the investments held. The amount withdrawn will be taxable at source at the time of the withdrawal.|
|Effect of withdrawals on
|There’s no effect on the calculation of income for tax purposes. As a result, amounts taken from a TFSA won’t be considered in the determination of various benefits, such as the Old Age Security Pension, Guaranteed Income Supplement, Employment Insurance benefits and Canada child benefit.||Any money withdrawn is considered taxable income during the year in which it’s taken. The various benefits are then calculated accordingly.|
|Contribution limit||$5,500 per year, for all Canadian residents aged 18 years or older, regardless of income. The annual limit will be indexed to the inflation rate and rounded yearly to the nearest $500.||The annual contribution limit is equivalent to 18% of your earned income from the previous year, up to a limit defined by law for that year ($26,010 in 2017), less any pension adjustment, which reflects any benefits accumulated through a company-sponsored pension plan.|
|Unused contribution room||If your annual contribution is less than your allowable limit, the difference will automatically be carried forward to a subsequent year, and can be done so indefinitely. What’s more, any amount withdrawn during the previous year will be added to your contribution room for the current year, so you never lose your contribution room.||If your annual contribution is less than your allowable limit, the difference will automatically be carried forward to a subsequent year, and can be done so indefinitely. Any amount withdrawn from your RRSP will not be added to your contribution room.|
|Excess contributions||Excess contributions are subject to a tax of 1% per month for each month during which the excess remains in the account.||Excess contributions can’t surpass the lifetime cumulative limit of $2,000. The monthly penalty on the surplus is 1%, and is applicable until the surplus is withdrawn from the RRSP.|
|TFSA/RRSP conversion||The law allows you to contribute to a TFSA throughout your lifetime without the need to convert it to another type of account.||The law allows you to contribute to an RRSP until the end of the year in which you reach the age of 71; it must then be converted. You have two options: a registered retirement income fund (RRIF) or a retirement pension. You can also cash in the entire amount of your RRSP.|
THIS PRODUCT IS FOR YOU IF:
- You’ve already reached your annual contribution limit.
- You have no remaining unused RRSP contribution room.
- You’ve reached the age of 71 and can no longer contribute to your RRSP.
- You want to accumulate tax-free savings to pay for a specific project.
- You want to benefit from interest, dividends and capital
THIS PRODUCT IS NOT FOR YOU IF:
- You’ve unused RRSP contribution room and are not planning to use your funds prior to retirement.
- You want to prepare for your retirement. Indeed, for the purpose of retirement, the RRSP is generally the best solution, since contributions are tax-deductible and investment income is tax-sheltered.
Existing investment accounts are offered by Laurentian Bank of Canada (“Laurentian Bank”) or LBC Financial Services Inc. (“LBCFS”). LBCFS is a wholly-owned subsidiary of Laurentian Bank and a legal entity, distinct from Laurentian Bank, B2B Trustco, and any issuers or mutual fund companies whose products it distributes. All new investment account opening must be through LBCFS. A Laurentian Bank advisor is also a licensed LBCFS mutual fund representative. LBCFS’s liability is limited to the conduct of its representatives in the performance of their duties for LBCFS.